Central Bank expected to keep key rates unchanged: First Capital

June 21, 2017 (LBO) – The Central Bank of Sri Lanka is expected to keep key interest rates unchanged in its monthly monetary policy announcement on Friday, with slower first quarter growth and a deceleration in inflation contributing to the decision, First Capital Research said in a pre-policy research note.

GDP growth for the first quarter was slower than expected, growing 3.8 percent year-on-year, with the agriculture sector decreasing 3.2 percent year-on-year due to drought.

“We believe inflation will be under control over the next 2-3 months while there could be some upward pressure towards September and beyond with the floods in May 2017 affecting the supply in the current growing season. As a result there could be possible supply side shortages towards September and beyond.”

CCPI based headline inflation, decelerated on a YOY basis to 6.0% in May 2017 from 6.9% in April 2017, and CCPI based core inflation also decelerated to 5.2% in May 2017 from 6.8% in April 2017.